earnings001019

United Parcel Service,
boosted by growth in both its international and domestic U.S.
package markets, reported today a 22-percent rise in
quarterly profits, beating Wall Street expectations.

Atlanta-based UPS, the world’s largest package delivery
company, earned $702 million, or 60 cents per share, in this year’s third
quarter, compared with a profit of $577 million, or 52
cents, in the same period last year.

Analysts on average had expected UPS to earn 58 cents in the
third quarter, according to First Call/Thomson Financial, which
tracks such forecasts.

UPS’ global volumes, a key measure of financial health in the
package delivery industry, averaged 13.5 million pieces a day in
the quarter, up 6.2 percent from the same period last year.

UPS averaged volumes of about 1.1 million pieces a day for its
entire international service, a 14.9-percent gain from last year.
Volumes for the company’s U.S. domestic package business averaged
12.3 million pieces a day, a 5.4-percent rise over the year
earlier period.

“I think it was an exceptionally solid quarter,” said Edward
Wolfe, analyst with U.S. brokerage Bear Stearns, who noted that
UPS’ international and domestic ground volumes were particularly
strong in the third quarter.

Wolfe, who has a rating of attractive with a 12-month price
target of $64 a share on UPS, said the stock would likely see some
buying if U.S. stock markets had a “normal” trading session.

UPS, which has traded at a high of $76-10/16 and a low of
$49-8/16 during the past year, closed at $53-1/16 on Wednesday on
the New York Stock Exchange.

The package deliverer also said today it was confident
it would enjoy a solid fourth quarter, which includes the busy
holiday season. Holiday volume is expected to produce a one-day
peak exceeding 19 million deliveries, it said.

“We are successfully executing our strategy and growing every
segment of our business,” UPS Chairman and Chief Executive Officer
Jim Kelly said in a statement accompanying the earnings results.

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Sears Beats the Street

Retail giant
Sears Roebuck reported today an 18 percent
increase in third-quarter income that beat Wall Street
forecasts, as fewer outstanding shares and a good performance
from its credit operations boosted results.

Sears, the No. 2 retailer behind Wal-Mart Stores Inc.,
reported net income in the third quarter rose to $278 million,
or 81 cents a diluted share, compared with $236 million, or 62
cents, in the same quarter a year ago.

Third-quarter 1999 earnings included a non-comparable charge
of $29 million, or 7 cents per share, for staff reductions and
the exit from certain automotive retail markets.

On average, analysts polled by First Call/Thomson Financial
had expected the retailer to report a profit of 80 cents a
share.

Sears repurchased 6.4 million shares during the quarter.

Total revenues in the quarter climbed to $9.63 billion from
$9.20 billion a year ago. The revenue increase was primarily due
to improvements in Sears department stores and Sears Canada.
Domestic comparable store sales increased 3.5 percent.

“Our credit business contributed very strong growth in
operating income,” Alan Lacy, Sears president and chief
executive, said in a statement. “We are pleased with the quality
of our credit portfolio and our ongoing productivity
improvements. Retail results reflect strong sales performance
across several important businesses and investments in new
retail growth initiatives such as The Great Indoors.”

Consolidated gross margin as a percentage of merchandise
sales and services fell to 25.6 percent from 26.5 percent in the
third quarter of 1999. Both domestic and international margins
declined. The decline in domestic retail margins is due to
increased apparel markdowns and a higher mix of hardlines
products, Sears said.

Credit operating income increased by about 22 percent to
$385 million mostly due to substantial reductions in selling and
administrative expense.

The Winston-Salem, N.C.-based maker of Camel, Doral,
Winston and Salem cigarettes said quarterly profits rose to
$117 million, or $1.16 per diluted share, from $110 million, or
$1.01, in the year-ago period. Analysts polled by First
Call/Thomson Financial on average were forecasting earnings of
$1.15 per share.

The company said it sees full year net income rising 6 to 8
percent, to between $390 million and $400 million, resulting in
diluted earnings per share between $3.85 and $3.95, an increase
of 13 to 16 percent from 1999. Cash net income per diluted
share is seen rising 10 to 12 percent to between $7.05 and
$7.15 while Reynolds Tobacco shipment volumes are seen down
about 1 percent.

The Northbrook, Ill.-based company, second only to giant
mutual State Farm in the United States car and home insurance
market, said operating earnings, excluding a restructuring
charge and capital gains, rose to $537 million, or 72 cents per
share, from $401 million, or 51 cents, in the year-earlier
quarter.

The results beat analysts’ average forecast of 70 cents per
share, according to market research firm First Call/Thomson
Financial.

Net profits for the quarter, including a $12 million
restructuring charge and $129 million in realized capital
gains, rose 31 percent to $644 million, or 87 cents per share,
from $490 million, or 62 cents, in the same quarter a year ago.
Overall revenues rose 14 percent to $7.45 billion.

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BMY Posts Double-Digit Growth

Pharmaceutical company
Bristol-Myers Squibb, which late last month announced a restructuring, reported today a 13 percent rise in
third-quarter net profits on strong double-digit sales growth
in key drugs.

Bristol-Myers, the No. 3 U.S. drugs maker which produces
the Glucophage/Glucovance family of diabetes drugs and
cholesterol drug Pravachol, posted net income of $1.24 billion,
or 62 cents per share, compared with $1.09 billion, or 54
cents, in the year-ago period. Excluding beauty care and Zimmer
operations, which it plans to divest, earnings per share jumped
16 percent to 57 cents from a year-ago profit of 49 cents.

Analysts on average had estimated the company — which said
on Sept. 28 it would divest its Clairol beauty products unit
and its Zimmer orthopedic device division in the next six to 12
months — would earn 61 cents per share, according to First
Call/Thomson Financial.

The company said total pharmaceutical sales for the period
rose 12 percent to $3.6 billion, driven by an 18 percent jump
in U.S. prescription drug sales. Pravachol sales climbed 16
percent to $446 million, breaking out of a trend in recent
quarters of relatively flat growth. Sales of Glucophage rose 25
percent to $435 million, while sales of its Taxol drug for
breast cancer rose 11 percent to $417 million.

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EBay Surpasses Estimates

The popular Internet
auction site eBay Inc. reported third quarter
earnings that surpassed Wall Street expectations.

The San Jose-based company earned $15.2 million, or 5 cents per
share, for the three months ended Sept. 30, compared with $1.2
million, or 1 cent per share, in the same period last year.

The earnings consensus of analysts polled by First Call/Thomson
Financial was 4 cents per share.

During a conference call with analysts, eBay executives
said they expected eBay’s robust growth to continue in the months
ahead.

The company said it is comfortable with Wall Street’s
expectation for a fourth quarter profit of 6 cents per share and
forecast 2001 revenue of $630 million, roughly 50 percent higher
than the projected amount for this year.

EBay is promising $3 billion in annual revenues by 2005.

“The best has yet to come,” eBay CEO Meg Whitman told
analysts.

In the third quarter, eBay’s revenues totaled $113.4 million, a
94 percent improvement from $58.5 million in the prior year.

Through the first nine months of the year, eBay earned $24.4
million, or 9 cents per share, on revenue of $297.4 million. That
compared to a profit of $5.8 million, or 2 cents per share, on
revenue of $150.8 million in the comparable 1999 period.

EBay’s growth is being propelled by its steadily growing
population of online traders. As of Sept. 30, eBay boasted 18.9
million registered users, up from 16 million as of June 30 and a
146 percent increase from the 7.7 million users signed up for the
auction service in September 1999.

The service has become so pervasive that the eBay has become a
piece of popular culture, getting almost daily mention in a wide
range of media, from specialty publications to prime-time network
TV dramas. eBay is now negotiating to broadcast its own TV show.

Perhaps the biggest danger facing eBay is that people will
become bored with online auctions, warned Prudential Securities
analyst Mark J. Rowen in a recently released report.

“While early indications appear to signal that the online
auction format is here to stay, it is possible that in hindsight,
we will view it as a passing fad,” Rowen wrote.

Rowen doubts that will happen though. He is recommending that
investors buy the stock with a price target of $125.

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Eli Lilly’s Net Income Up 15%
Pharmaceutical giant Eli Lilly, whose stock tumbled in August after it lost a patent battle over its antidepressant Prozac, reported today a
15 percent rise in third-quarter net income on strong sales of
drugs for schizophrenia, cancer and osteoporosis.

The Indianapolis-based company said net income rose to
$778.8 million, or 71 cents per diluted share, excluding a
one-time gain.

Analysts on average had predicted Lilly would earn 71 cents
per share, according to First Call/Thomson Financial. The
company said on Aug. 9 that it expects single-digit earnings
growth in 2001 and 2002, primarily because of a court ruling
that would trigger expiration of patent protection over Prozac
in mid-2001, opening the way to generic competition.

Lilly reported a 9 percent increase in third-quarter
revenues, to $2.812 billion, led by sales of the schizophrenia
drug Zyprexa, the cancer drug Gemzar, and the osteoporosis drug
Evista. Separately, Sepracor said Lilly had terminated a
licensing deal involving the drug R-fluoxetine, closely related
to the active ingredient in Prozac, and had returned the rights
to the product to Sepracor.

Shares of Lilly, which were trading at a year high of
$108-15/16 in August before falling 31 percent on a federal
judge’s ruling on Prozac, closed at $89-1/4 Wednesday on the
New York Stock Exchange. Lilly’s 52-week low is $54.

Equifax reported net income of $64.3 million, or 47 cents
per diluted share, compared with $58.1 million, or 42 cents, in
the year-earlier period. The results edged ahead of analysts’
average expectations of 46 cents a share, according to market
research firm First Call/Thomson Financial.

Equifax, which on Oct. 2 said it would spin off its payment
services division to shareholders, also said it has sold its
collection services businesses in the United States, Canada and
England for about $150 million. The company said it will use
the net cash proceeds of the deal, about $100 million, to pay
down debt.

Equifax said it sold the U.S. unit of Equifax Risk
Management Services to Atlanta-based Risk Management
Alternatives Parent Inc. IntelliRisk Management Corp., based in
Columbus, Ohio, bought the Canadian and British operations,
Equifax said.
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First Union Tops Estimates

First Union, the
No. 6 U.S. bank holding company, said today its
third-quarter profits rose 6 percent, topping estimates, as it
turns around its operations after prior unwieldy acquisitions.

The Charlotte, N.C.-based bank, which has about
$260 billion in assets and more than 2,200 branches, earned $852
million, or 86 cents a diluted share in the quarter, compared
with $802 million, or 84 cents a share, a year ago. Excluding
gains and restructuring charges, the company earned $702
million, or 71 cents a share, in the quarter.

Wall Street had expected the bank to earn 69 cents a share
in the quarter, according to First Call/Thomson Financial, which
tracks analysts’ consensus earnings forecasts.

First Union is in the midst of a $3 billion restructuring
plan, announced at the end of June, to revive revenue growth
after troubles integrating a string of acquisitions. Its stock
has tumbled about 40 percent from its 52-week high of $44-5/16
hit last November.

Many U.S. regional banks face slower revenue growth after a
series of interest rate increases that have put pressure on
lending profits. Higher rates make it more costly for banks to
borrow to fund loans and sometimes make borrowers default.

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UAL Posts $64 Million Loss

UAL, parent of United
Airlines, the world’s largest airline, said today it lost
a greater-than-expected $64 million in the third quarter, before
one-time items, as flight cancellations, delays and higher costs
for jet fuel and wages hurt results.

Chicago-based UAL said the $64 million loss amounted to
$1.29 a share, compared with a profit of $359 million, or $2.89
a share, a year earlier. The last time the company lost money
was in 1993.

Analysts on average had forecast a loss of 54 cents,
according to First Call/Thomson Financial, with estimates
ranging from a loss of $1.15 to a loss of 20 cents.

Including a loss on warrants the company owns in
Priceline.com, a charge for planned early retirement of four
leased aircraft and a loss associated with the early retirement
of debt, UAL lost $116 million, or $2.30 a share.

Revenues rose 1.2 percent to $4.91 billion from $4.85
billion a year earlier.

UAL, which has agreed to acquire US Airways Group Inc. for
$4.3 billion, had warned twice during the third quarter that its
results would fall short of analysts’ earnings forecasts for the
second half of the year. Prior to the last warning in September,
analysts had expected the company to earn 97 cents a share for
the quarter.

UAL said reduced capacity levels to address operational
problems will continue to hurt its fourth-quarter performance.
Additional costs from its new pilot contract, expected to be
ratified this month, and from other labor contracts being
negotiated and higher fuel prices, will likely cause it to lose
money in the fourth quarter, the company said.
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E*Trade Profitable in Q4

E*Trade,
the No. 2 U.S. Internet broker, posted today a quarterly
profit compared to a loss in the year-ago period as it sold
investment assets and kept a lid on advertising spending.

The Menlo Park, Calif.-based company, which has 3.3 million
customers, reported a net profit of $47.7 million, or 15 cents
per share, for the fiscal fourth quarter ended Sept 30. That
compared with a net loss of $28.0 million, or a loss of 10
cents per share, in the same period last year. Net revenue rose
76 percent to $340 million.

Excluding merger costs and other items, E*Trade posted a
profit of $7.2 million, or 2 cents per share. The operating
results beat Wall Street’s lowered expectations calling for the
brokerage to break even with zero cents per share. Analysts
have cut their profit forecasts for Web brokers because of a
decline in the Nasdaq stock market and an estimated 10 percent
drop in share trading volumes during the quarter.

E*Trade opened 337,000 new brokerage and banking accounts
in the period, similar to the 340,000 accounts it opened a
year-ago and the 330,000 it opened in the fiscal third quarter.
The company spent $91.8 million on advertising and marketing in
the quarter, up a nominal 5 percent from $87.0 million last
year, but sharply lower than the $115 million it spent in the
fiscal third quarter.

The company said it processed an average of 150,000 trades
per day during the period, up 84 percent from 81,000 in the
year-ago period but down from 169,000 last quarter. Total
customer assets more than doubled to $66 billion from $28
billion a year ago, helped by E*Trade’s purchase of the
brokerage accounts of Wit Capital.

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McDonald’s In Line with Estimates

No. 1 restaurant company
McDonald’s said today its third-quarter profit rose 1 percent, meeting expectations, as a weakened euro continued to
hurt results.

The global fast-food restaurant chain said its net income rose to $548.5 million, or
41 cents a share, from $540.9 million, or 39 cents, in the
year-earlier period.

On average, analysts polled by research firm First
Call/Thomson Financial had expected earnings of 41 cents a
share.

Sales at the company’s systemwide restaurants, which include
company-operated and franchised units, rose to $10.512 billion
from $9.998 billion in 1999.

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Sluggish Sales Cost Hasbro
Hasbro, the No. 2
U.S. toy maker, reported today that its profits fell 84
percent due to sluggish sales and mounting losses in its
interactive operations.

Hasbro said net income fell to $13.8 million, or 8 cents a
diluted share, compared with $85.2 million, or 43 cents, for
the same quarter a year ago.

Analysts lowered their expectations to 7 cents a share for
the quarter, according to market research firm First
Call/Thomson Financial. Hasbro warned last week that its
performance would fall well short of previous estimates largely
because of a sharp slowdown in sales of Pokemon and Star Wars
products. It also said it was slashing its work force by about
5 percent.

“Even with challenging comparisons against last year’s
record results, I’m not pleased with our third-quarter
performance,” Hasbro Chairman Alan Hassenfeld said in a
statement.

Hasbro’s most recent outlook for full-year 2000 earnings
per share was 40 cents to 50 cents, before $140 million to $170
million in pretax charges.

Hassenfeld said the company was evaluating the fourth
quarter before providing a revenue and earnings outlook for
2001.

Earnings in the third-quarter included a pretax loss of $6
million from Internet games operation Games.com. Its
interactive division did not live up to already-reduced
expectations, and Hasbro said last week it was exploring
strategic alternatives for the business.

Pokemon toy demand in the U.S. was soft, but strong
internationally, the company said. Revenues from Star Wars
toys are expected to be minimal in 2000.

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U.S. Bancorp Meets Estimates

Regional bank U.S. Bancorp
said today its third-quarter operating earnings
rose 0.5 percent, in line with expectations, as loan volume
increased but expenses did too.

Minneapolis-based U.S. Bancorp, which this month announced
it was being bought by rival Firstar Corp. in a stock deal
worth almost $20 billion, earned $410.9 million, or 55 cents a
diluted share, in the third quarter, excluding one-time merger
charges and profits from securities sales. That compares with
$409 million, or 56 cents a share, in the year-earlier period.

Results met Wall Street forecasts of 55 cents a share,
according to market research firm First Call/Thomson
Financial.

The bank’s net profits, including $9.6 million in merger
charges and one-time securities transactions, rose to $401.3
million, or 54 cents per share, from $396.4 million, also 54
cents per share.

U.S. Bancorp’s provision for loan losses in the third
quarter rose 22 percent to $173 million. Net interest income,
which includes the profit the bank makes from loans, rose 4.5
percent to $883 million as loan volume continued to grow
despite higher interest rates.

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Quaker Oats Q3 Profit Up 16%

Quaker Oats, maker of hot
and cold cereals, said today its third-quarter earnings
rose 16 percent, beating the average analyst forecast, on
continued robust demand for its Gatorade sports drink.

The company also said it expects full-year 2000 earnings per
share growth before items in the range of 20 percent or slightly
better.

The Chicago-based food company, whose stable of products
includes breakfast bars, Rice-A-Roni side dishes and Aunt Jemima
pancake mixes and syrup, said earnings rose to $159.2 million,
or $1.15 per diluted share, in the quarter. That compares with
$137.3 million, or $1.01 a diluted share, excluding unusual
items in the same period a year ago.

Analysts on average had expected the company to earn $1.11 a
share, according to First Call/Thomson Financial, which tracks
earnings data.

Third-quarter net sales rose to $1.48 billion from $1.38
billion a year ago.

The Boston-based maker of razors and blades, Oral B
toothbrushes and Duracell batteries, also said Chairman and
Chief Executive Michael Hawley was retiring immediately. Edward
Degraan was named acting chief executive and Richard Pivirotto
was named non-executive chairman of the board.

Gillette posted third-quarter earnings of $350 million, or
33 cents a share, from continuing operations, compared with
earnings of $355 million, or 32 cents per diluted share for the
same period in 1999.

Analysts surveyed by First Call/Thomson Financial had
estimated Gillette would earn 33 cents a share in the third
quarter.

The company has had a string of disappointing earnings
reports dating back to 1999, blaming a combination of foreign
exchange rates and proper inventory stocking.

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AHP’s Profits Rise 18% Before Charge

American Home Products posted today a steep rise in quarterly operating profits,
matching analyst expectations, but the No. 5 U.S. drug maker
said it would have to set aside additional funds for its diet
drug settlement for which it has already paid billions in the
“fen-phen” case.

The Madison, N.J.-based maker of Advil, Robitussin and the
oestrogen replacement drug Premarin reported net income of $762
million, or 58 cents per share, in the third quarter vs. a net
loss of $2.87 billion, or $2.20 cents, in the year-ago period.

The year-ago loss mainly reflected a $4.75 billion
litigation charge for a settlement related to the diet drugs
Redux and Pondimin. Excluding this charge from the 1999
third-quarter results, income from continuing operations in the
latest quarter increased 18 percent to $762 million from $645
million.

Analysts on average had estimated that the company, whose
Wyeth-Ayerst unit will pay the U.S. government $30 million for
violations at two plants, would post earnings of 58 cents per
share, according to research firm First Call/Thomson
Financial.

Looking forward, AHP said it expects additional reserves
will be required in the diet drug settlement. It said that
though it is still unclear how much that will amount to, AHP
expects it to be lower than the $4.75 billion recorded in the
1999 third quarter.

A spokesman for the company declined to specify a range of
the amount of reserves that would be used.

Patients typically combined either Pondimin or Redux with
another diet suppressant called phentermine to make the
“fen-phen” diet cocktail. AHP recalled Pondimin and Redux in
1997 after some of the 6 million Americans who had taken
fen-phen developed heart problems, including leaky valves.

Overall net sales increased 13 percent from the same
quarter last year.

Global consumer health care sales increased 7 percent for
the quarter, as sales of the Centrum family of vitamin products
rose. However, the company experienced a sales slowdown for
cold, cough and allergy products, as well as for pain reliever
Anacin.

“The double-digit sales and earnings growth through the
first three quarters of 2000 have been driven by increased
demand for franchise products and enhanced by an impressive
number of new products introduced into the marketplace,” said
Chairman and Chief Executive Officer John Stafford in a
statement.
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For the three months ended Sept. 30, Raytheon earned $105
million, or 31 cents per share, up from a loss of $163 million, or
48 cents per share in the year-ago period.

Earnings from continuing operations were $133 million, or 39
cents per share, in line with a consensus estimate from analysts
surveyed by First Call/Thomson Financial.

The Lexington, Mass.-based aerospace and defense company lost $89 million, or 26 cents per
share, from continuing operations in the year-ago period, in part
due to charges of $464 million, or 84 cents per share.

Revenue rose to $4.16 billion, up from $4.12 billion a year ago.

Sales in most divisions were similar to a year ago. The
Electronic Systems division reported sales of $1.9 billion, down
from $2.0 billion.

Raytheon Aircraft Company, a division the company is reportedly
trying to sell to reduce its debt burden, recorded sales of $749
million, up 6 percent from a year ago due to higher aircraft
deliveries.

For the nine months ending Oct. 1, Raytheon recorded net sales
of $12.56 billion, down 4 percent from $13.02 billion over the same
period last year. Raytheon has a net loss for the first nine months
of the year of $23 million, compared with earnings of $332 million
in the year-ago period.

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Mattel’s Profits Fall

Mattel, in the midst of a
restructuring and under new leadership, said its profit fell 22
percent in the third quarter because of declining sales.

The company said today it earned $174.3 million, or 41 cents
per share, from continuing operations in the quarter ended Sept. 30
as compared with profits of $222.2 million, or 52 cents per share
in the same period last year.

The results were in line with estimates of analysts surveyed by
First Call/Thomson Financial.

Sales increased by 2 percent in the United States, but fell 5
percent in international markets, the company reported. Sales of
the company’s two largest brands — Barbie and Fisher-Price —
increased during the quarter.

Mattel reported its earnings the day after the sale of its
money-losing interactive toy division, The Learning Co.

Mattel took a one-time charge of $441 million as the result of
the sale, but said the sale would save it $1 million a day in
operating losses.

The company’s disastrous experience with The Learning Co. cost
former chief executive Jill Barad her job. Barad was replaced in
May by chief executive Robert A. Eckert.

The company also took a restructuring charge of $74 million, or
18 cents per share. Including one-time charges, the company lost
$336.8 million, or 79 cents per share, in the quarter.